Stablecoin giant ramps up blacklisting as law enforcement leans on issuers to halt illicit funds
Tether has frozen approximately $4.2 billion worth of USDT linked to suspected criminal activity over the past three years, highlighting the increasingly central role stablecoin issuers play in global enforcement efforts.
According to comments shared with Reuters, the bulk of the restrictions have occurred since 2023, as regulators and law enforcement agencies stepped up investigations into crypto fraud, sanctions evasion and money laundering. Tether, headquartered in El Salvador, has the technical ability to blacklist wallet addresses directly onchain when prompted by authorities.
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With more than $180 billion in USDT currently in circulation — up from around $70 billion three years ago — Tether remains the dominant force in the stablecoin market. That scale has also made it a critical chokepoint in efforts to track and freeze suspicious transactions.
Stablecoin issuers become frontline enforcement partners
Tether has recently publicized several high-profile interventions. Earlier this week, the company said it assisted the US Department of Justice in seizing nearly $61 million in USDT tied to so-called “pig-butchering” scams, a form of online investment fraud in which perpetrators cultivate relationships before convincing victims to transfer funds.
In another case this month, Tether froze roughly $544 million in crypto at the request of Turkish authorities, blocking funds allegedly linked to illegal online betting and money laundering operations.
Data from blockchain analytics firm Elliptic suggests that by late 2025, stablecoin issuers Tether and Circle had blacklisted about 5,700 wallets containing roughly $2.5 billion in assets at the time of freezing. Around three-quarters of those addresses held USDT.
USDt market cap drops in past month. Source: CoinMarketCap
The figures underscore a shift in how enforcement agencies approach digital assets. Rather than relying solely on exchanges or custodians, authorities are increasingly coordinating directly with stablecoin issuers capable of halting funds at the token level.
USDT supply contracts amid broader liquidity shifts
At the same time, USDT’s circulating supply has recently declined. Onchain data shows the token is on track for its largest monthly contraction in three years, falling by about $1.5 billion in February after a $1.2 billion drop in January.
The pullback mirrors the period following the FTX collapse in late 2022, when liquidity across crypto markets tightened sharply. A shrinking stablecoin supply can signal reduced trading activity or risk appetite, though it does not necessarily reflect waning demand.
Tether has characterized the recent supply changes as short-term distribution adjustments rather than structural weakness. USDC, issued by Circle, also recorded multibillion-dollar supply reductions over the same period.
As stablecoins continue to bridge traditional finance and crypto markets, their issuers are increasingly operating at the intersection of compliance, enforcement and liquidity management — a position that is likely to draw even closer regulatory scrutiny in the years ahead.